Oil Jumps to Four-Month High as Concerns Over Syria Escalate
Crude-oil futures settled at a four-month high Friday, lifted by fears that U.S. intervention in Syria will stoke further conflict in the oil-rich Middle East.
Prices rose as the Obama administration moved to provide arms to rebels fighting Syrian President Bashar al-Assad, after intelligence agencies concluded that Assad's forces have used chemical weapons against opposition fighters. The U.S. was also mulling a no-fly zone in Syria close to the country's border with Jordan, according to U.S. officials.
While Syria is not a major oil producer, investors fear that the two-year-old civil war could spill over to affect oil supplies in nearby countries.
Saudi Arabia, which officials believe is one of the main suppliers of arms to the rebels, is the world's largest oil producer. Traders are also concerned about the involvement of Iran, which was a major oil supplier before heightened U.S. and European Union sanctions crimped exports last year.
"U.S. involvement in Syria creates a potential for...disruptions in the region," said Ray Carbone, president of commodities-trading firm Paramount Options in New York. "That danger is being reflected in oil prices."
Light, sweet crude for July delivery rose $1.16, or 1.20%, to settle at $97.85 a barrel on the New York Mercantile Exchange, the highest since Jan. 30.
Brent crude for August delivery on the ICE Futures Europe rose 96 cents to $105.91 a barrel.
U.S. oil prices had been stuck in a tight trading range over the past two months, hovering around $95 a barrel amid rising domestic supplies and a slowly improving economic outlook.
But the potential for Middle East conflict has quickly shifted traders' focus, turning attention back to the region for the first time since new sanctions were placed on Iran roughly a year ago.
An expanded military role for the U.S. could lead to a "proxy war" in Syria, analysts warned, adding that other energy suppliers, such as Russia and Iran, may step up their involvement. Russia rejected the U.S. government's evidence of chemical weapons used in the Syrian civil war Friday, calling it "unconvincing."
"Syria is important for the stability of the entire Middle East," said Carsten Fritsch, an oil analyst at Frankfurt-based Commerzbank.
Meanwhile, Iran's presidential election to replace Mahmoud Ahmadinejad also held investors' attention. Voting began Friday, and was extended by an hour due to higher-than-expected turnout. The results could help determine how the country approaches negotiations with western nations regarding its nuclear program.
Front-month July reformulated gasoline blendstock, or RBOB, settled 3.54 cents higher at $2.8967 a gallon. July ULSD heating oil settled 2.27 cents higher at $2.9622 a gallon.
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